Sunday, June 6, 2010

Itz Weekend Market Review

Add to Technorati Favorites Subscribe in a reader

This current markets ups and downs reminds me of two movies, the Godfather & Rocky. This past Friday's closely anticipated Jobs Report was disappointing, as many economist and analysts projected 200,000 private jobs. Goldman Sachs revised their estimates to 600,000 late in the week. President Obama and VP Biden both bragging in a televised speeches about the strong jobs growth expected in May.

The May jobs report showed a gain of 431,000 new jobs, the Census Bureau was expecting to hire 400,000 temporary workers in May. They did not quite get all 400,000 hired but came close at 390,000. That means actual hiring across the U.S. amounted to ONLY 41,000 real jobs. All the rest was temporary Census.
As Michael Corleone famously quoted in the Godfather ~"Just when I thought I was out... they pull me back in!"~ That's how many are feeling after they expected the Jobs report to get this market out of this rut. It has been and unbelievable market at that over the last several weeks. Totally driven by news events, from U.S. and abroad has been hitting the markets, like Apollo Creed punching Rocky.
If the jobs numbers were not enough to shake up investors we also found out that Hungary may be the new Greece. The new Hungarian government, which was sworn in less than a week ago, said it was going to announce a new austerity plan to tackle the countries current economic problems. The sudden arrival of Hungary as a potential debt crisis equal to Greece is not such a big deal other than it again is a warning that European countries are not stable. Greece in April, Spain in May and Hungary in June. Who will pop up to attract headlines in July?
This market has become so sensitive that even rumors can trigger 100 point declines in the Dow. There was a strong rumor that Societe Generale (SocGen) was facing a huge derivatives loss, later declined by the firm.
On top of this the BP oil spill continues to grow and appears to have a greater economic and environmental impact on the U.S..
Richard Bove, on Friday cut the price target and earnings estimates for Goldman Sachs and Morgan Stanley. He cut Goldman's target to $182 from $200 and earnings per share to $17.17 from $18.72. Bove said the quarter had been very bad for trading in both equities and bonds in the investment banking arena. He said it was going to be a bad quarter for Goldman.
So, two key sectors, energy and financial, which are the main drivers of the S&P500 are not gaining traction, one cannot expect the $SPX to trend higher near term.
Bottom line, watch the 1040 level on the S&P500, overall it looks bearish for the week ahead. The market technicals, fundamental and sentiment readings point to a lower market. As always remain hedged, either with puts, inverse ProShares ETF's (SDS,VXX) or take some money off the table.



No comments: